What is rentvesting?
If you have never heard of rentvesting before, we don’t blame you. Not many people are aware of this property investment technique for financial growth – or if they are, they don’t fully understand how it works. We’re here to rectify that, and let you in on a property investment arrangement that could help build on your financial position without sacrificing your lifestyle.
In a nutshell, rentvesting describes a buyer purchasing their your first home in a high growth suburb (which is often further out of main towns or cities in less established areas). Instead of moving into the property, the buyer rents it out to tenants, and remains in their own rental accommodation in their chosen suburb – which is often more established and therefore more expensive.
The benefits of rentvesting
Many people dream of getting on the property ladder, and investing in property is a great way to secure your future finances and set yourself up for the future. However, buying your first home often means compromise. It could be that you have to move further out of town to an area you can afford, you may be moving further from work or the amenities you enjoy, or perhaps you’ll need to downsize and get rid of a few possessions.
Understandably, not everyone wants to compromise their lifestyle to get on the property ladder. Luckily, it doesn’t have to be this way. A rentvestor is able to get on the property ladder and benefit from a growing housing market, while still renting and enjoying the lifestyle they’re used to.
How to start rentvesting
There are a few steps to start rentvesting, and it isn’t much more complicated than standard property purchasing. Firstly, it’s important to get an understanding of your finances and what you can afford – this will help to guide the areas you’ll be looking in and your financial plan. It’s best to be conservative when deciding how much you can borrow, particularly with rentvesting. If you don’t have a tenant for 52 weeks of the year, or if something unexpected occurs, you’ll need to be able to afford to cover your investment property costs as well as your own rent.
Financing your property investment
Shopping for a home loan as a rentvester is a little different to traditional property purchasing. You’ll need an investment home loan designed for people intending to rent out their properties. Investment home loans work the same as other home loans – you borrow a certain amount of money and pay it back with interest over a set number of years – but investment home loans typically come with slightly higher deposit requirements, fees, and rates. For this reason, it’s important that you shop around and do thorough research on investment home loans to get a deal that works for you.
Where to purchase your property investment
After you’ve identified your budget, you can shop around for a property in high growth suburbs. This requires some serious property market analysis – and it’s best to undertake this with a professional who will have experience in reading the property market, and will understand what to look out for when seeking a potential area of high growth. This can include infrastructure investment, transport lines, or even new businesses in the area – all of which can have an impact on property prices.
As a rentvester, you won’t be considering properties against your own desire to live there; you’ll be considering what makes a good property investment. This means considering how easy the property will be to maintain, how attractive it will be to potential future tenants, and how easy it is to get to nearby amenities. These are all things that will help your property grow in value over time.
Rentvesting for your future
Once a rentvestor has purchased a property in a high growth area, it’s time to wait it out. If you’ve chosen wisely, your investment should grow in value steadily, and if you have set up your investment to be positively geared, you may even receive profits each month. After a certain period of time – it could be as little as three or four years – you may have gained enough on your investment to sell it and use the money as a deposit on a home you intend to live in, in your preferred area. In our experience at Reventon, people typically see how beneficial it is to own an investment property in a high growth area, they hold onto their asset and continue to live in a rental in their area of choice. They may even release equity from their investment property to put towards a deposit on another home, whether to live in or as a second investment. Whatever your choice, it’s the freedom and options you get from owning your own property that makes rentvesting such a useful tool to gain financial freedom for the future.
Get expert rentvesting support
While rentvesting is a great way of building your wealth and security for the future, it does come with a few more complications than typical property purchasing. To ensure you’re making the best financial decisions along the way, it’s important to get expert support. At Reventon, we can help to identify high growth areas ripe for property investment, examine your finances to secure an investment home loan, to setting up the various tax benefits you could receive as a landlord – we can even support you with finding the perfect tenant and managing your investment property.
To discover if rentvesting is for you, or to get started, book your free consultation with a Reventon expert today.